Metals News
UPDATE 1-Congo's Copperbelt Wants to Recover "Illegal" Taxes
industry news
May 25,2010

LUBUMBASHI, Democratic Republic of Congo, May 24 (Reuters) - Mining firms in Congo's copperbelt say they will withhold millions of dollars of end-of-year tax payments to the government this year in a row over export levies.

Katanga, Congo's southern mining province, imposed a $60 per tonne tax on semi-finished product exports, which include the copper concentrate from which the metal is derived, following negotiations to overturn a ban on such shipments announced by national government in April.

"To introduce a new tax you need to go to parliament, so according to the mining code this tax is illegal," Eric Monga, mining representative of the Katanga chapter of Congo's business federation, FEC, said at a mining conference over the weekend.

Monga said the new laws will cost firms about $30 million.

"We are seeing this new tax as an advance -- companies are paying under protest now and they will deduct them from end of year tax payments," said Monga, whose federation next week plans to meet Prime Minister Adolphe Muzito to seek an end to the tax.

Worst hit is likely to be First Quantum's (FM.TO) Frontier project, which faces an additional tax bill of $18 million for the 300,000 tonnes of copper concentrate it expects to produce this year. The company paid a $55 million tax bill for 2009.

"As the biggest exporter of concentrate copper this hits us hardest. We have started to pay the tax under protest and intend to recover this money," said First Quantum's Mike Parker.


The Frontier project is itself in doubt after Congo's Supreme Court ruled on Friday that the firm acquired its mining title improperly. This follows last year's closure of First Quantum's $700 million copper and cobalt project in Kolwezi.

Freeport-McMoRan (FCX.N) said it too would reclaim taxes it is paying under protest.

Congo is rated among the world's worst places to do business and political risk cover has risen 40 percent since the closure of First Quantum's Kolwezi project in a contract review.

The global downturn hit Congo's mining sector hard.

"Now the price (of metal) is going up, the companies are making a huge profit and government is looking for more money," said Roger Tambwe, an official in the provincial mines ministry.

But miners complain of constantly changing tax demands.

"You just wake up one morning and they have added another tax," Johnson Deroyer, finance director of Boss Mining, a subsidiary of ENRC (ENRC.L), told Reuters, estimating an extra $4 million on his annual tax bill due to the move.

FEC has fought to remove a series of new taxes levied since the 2002 Mining Code, which stipulates no new taxes can be added for ten years. FEC secured the repeal of an import tax imposed earlier this year but a fuel levy to build roads remains.

Monga wrote an April 15 letter to Muzito saying the decision was reinforcing "the perception of legal insecurity in Congo."

"After (appealing to the prime minister) the only way is to go in front of the court," said Paul Franssen, Secretary General of George Forrest Group.

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